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CBRE Monthly Index: Industrials Lead the Way As Retail Falters

Leading global real estate firm CBRE has revealed that the total returns for commercial property hit 2.2.% for the year, following no movement in December and November.

While the figures released as part of CBRE’s Monthly Index make for acceptable reading for industrial or office investors, those backing retail projects should avert their eyes.

As covered by Commercial People last month, the retail sector continues to falter, with the total capital value growth in the retail sector reaching -12% for 2019.

Capital values in the office sector increased by 0.1%, while the rental values of the entire office market increased by 0.3% compared to the previous month. Total returns were 0.5%, and overall, the office market finished the year with strong returns of 6.9%.

As shown in the image above, the total returns for 2019 saw the Industrial sector deliver an impressive 7.6% (0.5% increase in December) as well as a rental value growth that matched that of the Central London Office sector at 3.1%.

Commenting on the snapshot, Toby Radcliffe, Research Analyst at CBRE UK, said: “At the All UK Property level, total returns were 2.2% in 2019. This is the lowest total return reported by the CBRE Monthly Index since 2012, but this is in line with what the market expected at the start of the year when the IPF consensus forecast was 1.8%.

“The year has been characterised by a decline in Retail capital values. While no subsector has escaped these difficulties, Shopping Centres have been particularly challenging. In contrast, Industrials and Offices have performed robustly throughout the year with Industrials finally emerging on top as the year’s best performing sector, and Rest of UK Offices as the best subsector.

“Investors expect a wide divergence in performance to persist into 2020, meaning macro and asset level allocation decisions will be crucial in determining portfolio performance.”

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